SkyMall loses its captive audience

With passengers absorbed in their electronics, the catalog known for peddling kitschy items aims to find a digital strategy

At SkyMall headquarters in Phoenix, Jennifer Williams, left, Liz Ford,… (Laura Segall, For The Times )

PHOENIX — Inside an industrial building next to Phoenix Sky Harbor International Airport, about a dozen product scouts meet daily to discuss their search for the next Garden Yeti.

This is the headquarters for SkyMall, the in-flight catalog that reaches an estimated 600 million travelers a year via the seat pockets of nearly every domestic flight. The yeti is one of the catalog's all-time bestsellers — more than 10,000 statues since the magazine started 24 years ago.

Could the next big hit be a foam beach pillow that can conceal two beers? A shoulder saddle to carry a toddler? A dry-erase board that can stick to any surface?

"We want people to look through the catalog and say, 'Oh, my God, why didn't I think of that?'" said Matt Genandt, 35, one of the product managers.

The meetings take on a new urgency these days, as a new era of passengers packing smartphones and tablets means the catalog has lost its captive audience. SkyMall lost $3.2 million in May through September of 2013, the only period reported in detail by its new parent company, Xhibit Corp., an Arizona marketing firm.

Analysts warn that SkyMall must modernize or join the Montgomery Ward and Sears catalogs on the scrap heap of retail history.

"SkyMall feels to me like it's in a time warp," said New York retail consultant Bob Phibbs. "It looks the same as it always has."

For the last two decades, SkyMall has been a symbol of America's love affair with kitsch and a respite for bored airline passengers. But the magazine needs a digital game plan to avoid domination by other online retailers such as Amazon.com.

"They need to look at new products," Phibbs said. "How many elevated pet food bowls do I need?"

The Federal Aviation Administration eased restrictions last year on the use of portable electronic devices, allowing passengers to keep their smartphones and tablets powered up during takeoffs and landings. And about half of domestic flights offer wireless Internet access.

Weiss is ready to invest more in online sales but said he won't turn away from the company's long-held business motto of selling "the coolest stuff on the planet."

SkyMall product managers travel to toy conventions, electronics expos and inventors conferences to hunt for those products. They also review the dozens of submissions sent each week by inventors and manufacturers.

Over the last two years, the hottest sellers have been a bed with storage drawers under the mattress ($300 to $600); a super-slim neck pillow ($20); shirts that squeeze in bulging bellies ($30); framed photos that spell out the names of colleges ($50); and T-shirts specifically made for guys named Bob ($20).

But the Garden Yeti — a rosin statue of the mythical ape-like creature — remains the company's unofficial mascot. The statue comes in three sizes, medium (21 inches tall), large (28 inches tall) and life size — nearly 6 feet tall and 150 pounds for $2,250, plus $225 for shipping.

The catalog was the brainchild of Robert Worsley, who was an accountant in 1989 when he came up with the idea of enabling travelers to order stuff through the phones that were installed in many seat backs during the 1980s and '90s. Under Worsley's original plan, SkyMall would deliver the ordered items to the gate when the passengers landed.

"If you can deliver a pizza in 30 minutes, why not deliver a product to the airport?" he said.

That concept failed, partly because travelers didn't want to lug a resin yeti or an automatic cat litter box from the airport. But delivery aside, Worsley soon found that weird, hard-to-find products were the hottest sellers.

He refined the SkyMall business plan and sold the company in 2001 for about $47 million to Gemstar-TV Guide International Inc. Worsley's 30% ownership was converted to Gemstar stock. He retired from the company in 2003 and is now a state lawmaker in Arizona.

Gauging the financial history of SkyMall is difficult because until recently it was a privately owned company and has traded hands several times.

In the last few years, SkyMall has been bought and sold by private equity firm Spire Capital and then by Bookspan, a direct-to-consumer media distributor, in 2012. SkyMall merged with a subsidiary of Xhibit Corp. last May.

In a financial report for the first nine months of 2013, Xhibit reported that SkyMall generated $27.6 million in revenue. SkyMall officials said the magazine makes about 40% of its sales in the last three months of the year because of the holidays.

But Xhibit has yet to file its financial report for the last quarter. Instead, it issued a notification March 17 saying that it would be late in filing with the Securities and Exchange Commission. In that notification, Xhibit said it expects the company as a whole to report a net loss of $9.1 million on $74.4 million in revenue for 2013.